Naira Registers Largest Unofficial Depreciation in FX Market
There is a bleak future for the naira as the exchange rate registered the largest unofficial daily depreciation in the forex market today due to the absence of FX intervention in a country that depends largely on imports – for further production in the manufacturing sector.
A large demand for foreign currency above the total market supply knocked down the Nigerian local currency, the naira, by about 18% to N951.22 versus the United States (US) dollar, according to FX traders.
The naira bear has been rummaging through the forex market as the Central Bank of Nigeria (CBN) left forces of demand of supply to determine the rate. For six weeks, the apex bank has failed to intervene in the official window.
The lack of FX liquidity has had a run on the local currency. The CBN hopes that FX forward repayment would saturate the forex market but analysts are less optimistic about the future of the local currency. Naira Devaluation Deepens Economic Crisis in Nigeria
MarketForces Africa reported that the exchange rate at the Nigerian Autonomous Foreign Exchange market had registered gains over two consecutive days amidst an expectation of FX inflows from Diaspora remittances in December.
At the current level, the gap between exchange rates at the official and parallel market has dropped, though the movement is negative for productive activities amidst rising costs propelled by weak local currency across industries.
The Naira skidded against the US dollar by 17.91% to N951.22 from N806.73 at the official market. Similarly, at the parallel market, the Naira saw further demand pressure as it depreciated by 0.34% to N1,169 per dollar.
In the global commodity market, oil prices experienced a negative trend at midweek, with Brent Crude trading at $75.75 per barrel and WTI at $70.77 per barrel. Nigeria’s gross foreign reserves still trending below $33.3 billion amidst an expectation of inflows announced by the Central Bank in recent times.
